Succinct Summary: The US economy is still doing well but worries over the Delta variant seem to be growing along with case counts. Inflation, tough comps, and the end of summer are three additional factors that may weigh on the economy. At this point, the data is only showing a marginal impact on consumer spending but it’s possible that we may see a slow down in the next few months.
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Macro:
The economy is doing well
"The U.S. economy is resilient. It’s growing. I might even say is booming, and so is New York. Financial, tech and almost all industries are achieving record results." - Vornado Realty Trust (VNO) CEO Steven Roth
"…it really has been a story of fairly broad-based strength in orders across almost every end market and every geography. So, at this juncture, we think we're at the very front end of what should be a pretty exciting runway as we look forward as some of the longer cycle businesses we talked about" - Eaton (ETN) CEO Craig Arnold
“I think the good news which is far more point we have a healthy underlying economy. The data is uncertain but the strength of the economy in my view is not - JPMorgan Chase (JPM) CEO Jamie Dimon
But Delta cases are worrying
"…the continued bit of cloudiness about the Delta variant, I think, is creating a little bit of a drag on food service at the moment. And so for us, the main characteristic of the third quarter and our guidance is simply lack of visibility" - Beyond Meat (BYND) CEO Ethan Brown
"…we're definitely not done with this. We shouldn't even call it post-pandemic. The pandemic is not over." - Fiverr (FVRR) CEO Micha Kaufman
There may be some impact on travel spend
"We are, of course, closely monitoring the impact of the Delta variant on the rising COVID case counts around the world as well as some newly imposed travel restrictions, which have led to a modest pullback in our booking trends in the month of July relative to June. However, the July booking trends were improved from our full Q2 results." - Booking (BKNG) CEO Glenn Fogel
"Yes, we've seen July improve from June levels in terms of percentage of 2019. The rate of improvement slowed May to June, as you saw in our numbers.” - TripAdvisor (TRIP) CFO Ernst Teunissen
But other consumer spending appears to be holding up
”So if you look at average daily rideshare rides, July was our best month since March of 2020. We saw growth month-over-month, and it was an all-time high.” - Lyft (LYFT) Brian Roberts
"Our July was better than our June. We're continuing to see improvements." - RCI Hospitality (RICK) CEO Eric Langan
And government restrictions will probably be less severe than in 2020
"…in many countries, some governments around the world have responded with new travel and leisure restrictions as well as some stricter vaccination and testing requirements for tourists. However, there are indications that hospitalization rates are lagging the recent increases in case counts, particularly in countries with high vaccination rates, which could be an important factor in how governments plan their responses to the recent increase in COVID cases." - Booking (BKNG) CFO David Goulden
Spending trends could shift as summer is almost over
“It certainly had a very strong July. And we'll see as we transition with -- from August, which obviously will be a little bit -- could be a little bit lighter as people think about going back to school and getting prepared to go back to the office. We certainly see that leisure could ultimately be slowing down a little bit. Traditionally, it does." - Park Hotels & Resorts (PK) CFO Sean Dell’Orto
How will Delta impact the return to offices?
”We continue to hear that that is very much a focus for employers is to by and large get their employees back to the office. Irrespective of that, I think there is certainly a tone change as it relates to irrespective of few employers that may delay their date past Labor Day or just after Labor Day." - Bright Horizons Family Solutions (BFAM) CEO Stephen Kramer
Inflation continues to be a concern
“Today, I want to speak about what used to be called the cycle of inflation...That relates to increasing prices and the expectation of ever-increasing prices…the cycle begins and feeds upon itself. I believe that this cycle of inflation is what we are beginning to experience today. Talent is scarce. Just look at the number of Companies that can find employees for their businesses, including Loews for its Hotel and Packaging businesses. Certain goods are also scarce. Here are just a few whose prices have shot up a lot. Computer chips, coffee, polyethylene pellets, tin and aluminum, soybeans, oil, natural gas, and yes, jet fuel. The CRB Raw Industrials Index is up by more than 50% from a year ago. Dishwashers, washing machine driers, and refrigerators are all on long backorders. Housing prices are up approximately 25%, 25% percent in the past year. And of course, there is the shortage of labor in the late -- in the labor market, a very, very serious shortage." - Loews (L) CEO Jim Tisch
"I hate to use the word unprecedented too loosely, but we are certainly seeing inflation with little recent precedent. While our conversations about inflation may have seemed early at the time, it is now hard to read, watch or listen to the news without hearing about inflation. Inflation is here, and it appears that it will likely be here for some time." - B&G Foods (BGS) CFO Bruce Wacha
"The market appears to believe the fed assertion, that inflationary pressures are not only transitory, but will be diffused quickly, we disagree. While we believe some inflation will prove short-lived, as bottlenecks related to economic reopening are resolved, we think we have reached a structural change in inflation and expect a period of sustained higher prices." - Greenlight Capital (GLRE) Chairman David Einhorn
Inflationary pressures could be bad for America
"I think this inflationary pressure is bad for the American economy period…if prices go up double digits. Do I think demand could be impacted. I think less than other people, but I think the answer is probably, yes. And I think that’s an honest answer." - The Scotts Miracle-Gro (SMG) CEO Jim Hagedorn
“I believe that we are now in a cycle of inflation rather than a spurt within an otherwise benign inflationary period….This inflation problem won't go away by simply wishing it away, especially with the Fed's proverbial foot still on the gas pedal... the Fed may have little choice but to take their foot off the proverbial gas pedal and take away the punch bowl, finally allowing interest rates to rise. There's only so long that the Fed can delay the inevitable. And to me, and maybe to Ruby -- Rudi Dombusch, a blessed memory that time may soon be upon us." - Loews (L) CEO Jim Tisch
The economy may start to slow
"…given the combination of increasingly challenging supply chain constraints on inventory replenishment, potential consumer demand shifts and the potential impact of the COVID-19 delta variant, we believe it is prudent to plan for slowing comparable sales" - Lumber Liquidators (LL) CFO Nancy Walsh
"…we’re starting to run up against tough comps in both businesses. Yes, we’re starting to see consumers get back to their normal routines. And yes, like a lot of consumer companies, the cost pressures we’re seeing from commodities are starting to feel unrelenting." - The Scotts Miracle-Gro (SMG) CEO Jim Hagedorn
Labour is still tight
“Obviously, it's a tight labor market. We are paying attention. We've got a lot of hiring to do to support growth. And so far, we see pressure but we've been managing through it. But we're watching that labor market, we're seeing impact s in the stores” - CVS Health (CVS) CEO Karen Lynch
“I believe that our current labor shortage is not a temporary phenomenon and it will only be resolved with significantly higher levels of compensation, causing costs to increase leading to ever-higher inflation" - Loews (L) CEO Jim Tisch
Please get vaccinated
"I hope everyone is healthy, continues to be vigilant and gets vaccinated. Let me say it again. Everybody, please get vaccinated." - Vornado Realty Trust (VNO) CEO Steven Roth
International:
The Chinese may act to stimulate their economy
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Europe’s recovery is still lagging
"Europe’s recovery is still lagging, given its heavy reliance on international guests, slower border reopenings and shifting restrictions that change on short notice." - Marriott (MAR) CEO Tony Capuano
Financials:
Capital is tight for the hotel industry
"Currently, there is very little financing available for most hotel developers in the full-service hotel space. As a result, being a well-capitalized owner-operator gives Loews Hotels a distinct advantage when competing for attractive development projects." - Loews (L) CEO Jim Tisch
Companies are saying they need more, not less office space after COVID
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Consumer:
Demand for live events is very high
"…everything we seem to be putting on sale is doing better than pre-pandemic...we're seeing the pent-up demand for live events play out...Most of our major festivals sold out in record time, while average ticket prices have been 10% higher than 2019." - Live Nation (LYV) CEO Michael Rapino
Consumers have shifted spending more towards services since May
"…we're monitoring the potential impact of a shift in consumer spending patterns in the second half of 2021. Since May, the U.S. has seen consumers shift spending from durable goods to services as they prioritize leisure activities over home improvement projects. In addition, inflationary pressure could cause consumers to postpone big-ticket projects until affordability improves." - Lumber Liquidators (LL) CEO Charles Tyson
Demand for cleaning and disinfecting products dropping faster than expected
"For Q4, faster-than-expected moderating demand for cleaning and disinfecting products, had a pronounced impact on sales growth, as we move through the peak of the pandemic and lapped the unprecedented demand we experienced last year...We knew it was going to moderate, it just moderated faster. But it hasn’t dipped below any level that we have expected. Predicting a pandemic is like predicting the wind." - Clorox (CLX) CEO Linda Rendle
It’s still tough to be a mall operator
"I'd say it's significantly improved, but not easy. Not a day at the beach. Retail is still -- look, I think a quarter like this, a couple of other quarters, pandemic in the rearview mirror, I expect it to get back to normal, but it's still not. That market is still difficult." - Simon Property Group (SPG) CEO David Simon
Technology:
Ridesharing didn’t exist 10 years ago
"Ridesharing is now so mainstream that it's easy to lose sight of how much has changed. Less than 10 years ago, peer-to-peer ridesharing didn't exist. Lyft launched in 2012, and it took a year to reach 1 million rides. Now we facilitate hundreds of millions of rides every year." - Lyft (LYFT) CEO Logan Green
Interactive entertainment is now the number one entertainment vertical
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Commercial passenger space flights coming in '22
"With the successful results from the Unity 21 test flight in May and Unity 22 in July, we stepped closer to completing our spaceflight program and launching commercial passenger service in '22...Prices for this next phase of private astronaut sales will begin at $450,000 per seat. Our microgravity research and professional astronaut training flights remain priced at $600,000 on a per seat equivalent basis." - Virgin Galactic (SPCE) CEO Michael Colglazier
Industrials and Transport:
Tight supply chains are likely to continue for the foreseeable future
"We expect the supply chain to remain constrained for this foreseeable future, potentially continuing to limit inventory availability and increased materials and transportation costs. From an international perspective, some of our sourcing partners across Southeast Asia have experienced temporary shutdowns due to COVID-19 outbreak, which limited production and delayed international shipping. We also continue to navigate general limited international container availability and higher container costs. Domestically, we do not expect the solid domestic hardwood supply to normalize until 2022 at the earliest. We also continue to see availability constraints on domestic trucking, which is impacting our transportation costs." - Lumber Liquidators (LL) CEO Charles Tyson
"…we have been able to make up for the challenges in semiconductor supplies. But as the supply bottlenecks drag on, the situation is becoming more volatile. That is why, we anticipate further disruption to production in the second half of the year and a related impact on vehicle sales.The uncertainty over supply chains and additional raw material headwinds remained high" - Bayerische Motoren Werke Aktiengesellschaft (BMWYY) CFO Nicolas Peter
"As for semiconductors, the situation does remain fluid, and the supply chain continues to be impacted by events like what is happening right now with the COVID spike in Malaysia." - General Motors (GM) CEO Mary Barra
"Demand outpaced the capacity improvements we were able to make or we were able to implement in the quarter. As a result, our unsupported backlog, which customers want to shipped in the June quarter continued to climb significantly resulting in lead time for many line items continuing to stretch out." - Microchip (MCHP) CEO Ganesh Moorthy
Inventories are low
"Dealer inventories are at record lows in the U.S. and in China, and they just can't build as many cars as they would wish to build." - NXP Semiconductors (NXPI) CEO Kurt Sievers
Maybe there are some green shoots?
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Health:
Boosters proving effective against variants
"We’ve shown you the Moderna vaccine that if you give a third dose of the same vaccine that is currently used in the US, you actually see a very important increase in geometric mean titer, the quantity of antibodies. For the Beta virus, the one first identified in South Africa, you get 42x increase between second does and third dose. For the Gamma, the P.1 in Brazil, you get 43x and for Delta, which we care a lot about, you get 42x and so we think the boosters are going to be very helpful to keep people safe for the long term but of course it’s up to the public officials to decide what to do and when to do it." - Moderna (MRNA) CEO Stephane Bancel
Materials & Energy:
Utilities are rapidly trying to deploy renewable electricity generation
"Renewables are playing a major role in our path to net zero. We continue construction on approximately 250 megawatts of new solar projects in North Carolina and Florida that we expect to bring online by the end of this year. And in recent weeks, we commissioned the 144-megawatt Pflugerville solar and 182-megawatt Maryneal wind projects in Texas. With the completion of these 2 projects, we hit a significant milestone, surpassing 10,000 megawatts of solar and wind resources...we are on track to pass 16,000 megawatts of renewables by 2025 and approximately 24,000 megawatts by 2030. By 2050, renewables will represent 40% or more of our energy mix." - Duke Energy (DUK) CEO Lynn Good
Oil-related companies are trying to transform too
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It may take longer than people expect to transition away from oil
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